From January 1, the maximum amount patients would pay for prescription medicines listed on the government's subsidy scheme will be reduced from $30 to $25, if Labor is re-elected.
Four out of five Pharmaceutical Benefits Scheme medicines would become cheaper, saving Australians $200 million every year and reducing the program's patient cost cap to its lowest level in two decades.
"Cheaper medicines are good for the hip pocket and good for your health," Health Minister Mark Butler said.
The $689 million proposal will be included in the federal budget, to be handed down on Tuesday, and is part of Labor's broader platform to improve Australia's healthcare system.
"With cheaper medicines, more free GP visits and a stronger Medicare, we say to Australians: we've got your back," Prime Minister Anthony Albanese said.
The Pharmacy Guild of Australia said that if Labor is re-elected, and the policy is implemented, prescription costs will fall to the lowest in 20 years.
"If this action had not been taken, Australians would be paying up to $50 per script in 2026," national president  Trent Twomey said.
In response, the opposition matched the government's plan.
"We will lower the PBS co-payment to $25 and continue our longstanding policy of listing all approved and recommended medicines on the PBS - and in a timely manner," health spokeswoman Anne Ruston said in a statement on Thursday.
However, the entire medicine subsidy program could be under threat after the US president threatened to expand his tariff regime.
According to Treasury estimates, Donald Trump's 25 per cent tariffs on all steel and aluminium imports are expected to directly impact Australia's economic output by less than 0.02 per cent by 2030.
But pharmaceuticals represent a bigger slice of the US-Australia trade relationship and American pharmaceuticals representatives have called on their government to impose further tariffs and said Australia should be placed on a "watch list".
"Egregious and discriminatory pricing policies in several markets, including Canada, Japan and Korea, continue to undervalue American innovation, threaten billions of dollars in lost sales and put American competitiveness, jobs and exports at risk," Pharmaceutical Research and Manufacturers of America wrote in a submission.
The group claimed PBS listings dictate access to the Australian market and that "unnecessary" supplemental data requests and other administrative motions cause significant delays.
Its submission further claimed that PBS pricing policies can have a "chilling effect" that prevents Australians from gaining fast access to new medicines.
The federal government continues to negotiate for tariff exemptions with the US administration.
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